Facing financial distress, partners Gary (40%), Gerry (30%), and Gina (30%) decided to liquidate the partnership on September 30, 2020. Their capital balances as of December 31, 2019 were P50,000, P60,000, and P20,000, respectively. The net income from January 1 to September 30 was P44,000 On the date of liquidation, cash and liabilities amounted to P40,000 and P90,000, respectively. For Gary to receive P55,200 in full settlement of interest in the partnership. how much should the non-cash assets be sold for?

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Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.